Social capital leading to innovation: understanding moderating effects of the environment in the Zimbabwean small and medium enterprise context

Abstract

PurposeRealizing the value of social capital to small and medium enterprises (SMEs) in developing economies, where relationship networks play a big role in filling the gaps that are left by dysfunctional institutions, the purpose of this paper is to gain an empirical understanding of various forms of social capital in relation to the innovation of SMEs in Zimbabwe.Design/methodology/approachPrimary data is collected from SMEs across several regions in Harare, where instrument validity is checked with confirmatory factor analysis, and hypotheses are tested using moderated regression analyses.FindingsA positive influence is observed for both alliance capital and reputational capital on innovation, while non-significant moderating effects in terms of environmental hostility and dynamism are noted for these relationshipsPractical implicationsOn a practical level, to increase levels of innovation, SME owner-managers need to secure stronger investments into their social infrastructure by developing (both physical and digital) alliance and reputational capitalsOriginality/valueBy segregating various forms of social capital, an original understanding is attained in terms of how entrepreneurs actively leverage alliance and reputational forms of social capitals to increase their levels of innovation. The theoretical and empirical understanding of the social capital-innovation link is enhanced, and the study constructs now have broader application as their psychometric properties have been established in an under-researched African market context.